Lopez Holdings posted net income of P3.9B

MANILA, Philippines–Lopez Holdings Corp. generated a net income of P3.9 billion in 2011, about a third of the previous year’s when it booked huge one-time gains from the sale of additional shares in Manila Electric Co. by affiliate First Philippine Holdings Corp.

First Holdings, for its part, booked P2.1 billion in net profit last year compared to P24.85 billion in 2010 when it earned P23.56 billion from the sale of additional shares in Meralco to the group of businessman Manuel V. Pangilinan.

In 2010, the comparative net income attributable to parent equity holders of Lopez amounted to P13.2 billion.

Lopez Holdings shares closed 3.78-percent higher yesterday at P5.48 each, giving the company a market capitalization of P24.2 billion. First Holdings shares were likewise up 1.7 percent at P64.85 for a market capitalization of P34.9 billion

AB Capital Securities recently initiated coverage of First Holdings with a “buy” rating and a target price of P85.75 each based on the “sum of the parts” net asset valuation, which values a company by estimating how much its units will be worth if spun off or acquired by another company.

“We think that [First Holdings’] modest growth performance and favorable cash levels make fundamentals attractive,” AB Capital Securities analyst Gregg Adrian Ilag said in a research dated March 8. In AB Capital’s view, First Holdings was a cheaper way of gaining exposure to several companies—First Gen Corp., Meralco and Energy Development Corp.

“Opportunities arising from the electric power industry remain sound, the Philippines needs an additional 16,550 megawatts over the next 18 years to avoid a shortfall in power generation. Out of these, only 1,354 MW were committed and 4,215 MW were indicative. In our view, the capacity shortfall on top of the current industry sources of energy (66 percent of installed capacity are fossil fuels) puts strong upward pressure on electricity prices. We also think that the shortfall presents opportunities for expansions of power generation companies,” Ilag said.